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Marketmind: Teutonic shifts By Reuters

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A look at the day ahead from Danilo Masoni.

One thing to take away from Sunday’s German elections is the fact that it could take weeks to complete coalition talks in order to establish the first post-Merkel administration.

Both the Social Democrats (SPD), and the Conservatives are looking to form a new government. However, at this moment, it seems that a “traffic light” coalition of the SPD, Greens and liberal FDP is most likely.

Actually, policy outcomes for either of the two options is not significantly different. However, if Scholz is able to capitalize on his narrow victory then, by Christmas, it’s possible that we will see an administration that endorses greater European Union integration, and looser fiscal policies in Europe’s largest economy.

This prospect could dent Bunds and lift equities, at a moment when the ECB wants to reduce its emergency stimulus. Although German bond yields declined from two-1/2 months highs it appeared unlikely that a leftist coalition will take power.

Equity futures are pointing to an excellent start in Europe, Wall Street and elsewhere. Markets also rejoice at a decrease in Sino-U.S. tensions after a settlement to end the U.S. Fraud case against the founder of Huawei. (Full Story)

Problems continue at Chinese property developer Evergrande; Hong Kong-listed shares in its electric car unit fell 23% after a warning it swiftly needs a cash injection. But, the global mood was not affected. This suggests that concerns regarding Evergrande’s imminent collapse may be beginning to ease. (Full Story)

Finally, a surge in oil prices to three-year highs was another reminder of risks associated to mounting inflation pressures, while panic fuel buying saw nearly a third of BP (NYSE:)’s petrol stations in the UK running on empty.

Key developments that should provide more direction to markets on Monday:

* German SPD seeks allies to replace Merkel-led coalition (Full Story)

* HSBC shares jump in Hong Kong as release of Huawei exec seen easing tensions (Full Story)

* BP says nearly a third of its UK fuel stations running on empty (Full Story)

* Private equity firm EQT (NYSE:) bids $3.94 bln for Germany’s Zooplus (Full Story)

* Federal Reserve speakers: Chicago Fed President Charles Evans speaks

* Bank of England Governor Andrew Bailey speaks

* Bank of Japan releases Minutes of Monetary Policy Meeting

* Emerging markets: Ghana cbank announcement

* U.S. durable goods orders

* Treasury auction: 2-year and 5-year notes

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